Question 1

What is the approximate market value for a $1,000 corporate bond that pays 8 percent interest when comparable bonds are paying 9 percent interest?

Accepted Answer

A)  $80
B)  $90
C)  $889
D)  $1,000
E)  $1,125F) A) and E)
G) B) and E)

Question 2

Treasury bills are issued at

Accepted Answer

A)  Par
B)  A premium
C)  A discount
D)  Face value
E)  Maturity valueF) B) and C)
G) C) and E)

Question 3

A registered bond is a bond whose ownership is registered in the owner's name by the issuing company.

Accepted Answer

A) True 
 B)False

Question 4

The interest rate for a $1,000 bond is 6 percent.If comparable bonds are paying 8 percent, what is the approximate market value for the 6 percent bond?

Accepted Answer

A)  $1,000
B)  $800
C)  $750
D)  $600
E)  $500F) B) and C)
G) C) and E)

Question 5

Which of the following statements is correct?

Accepted Answer

A)  Stock is a form of debt capital.
B)  Bonds are a form of debt capital.
C)  Stock must be repaid at maturity.
D)  Bonds do not have to be repaid at maturity.
E)  Interest payments to bondholders are at the discretion of the corporation.F) D) and E)
G) A) and C)

Question 6

Because bonds are considered debt financing that must be repaid at maturity, the corporation's financial stability has little effect on the bond's value between the issue date and the maturity date.

Accepted Answer

A) True 
 B)False

Question 7

Maturity dates for corporate bonds generally range from 5 to 7 years.

Accepted Answer

A) True 
 B)False

Question 8

Maturity dates for corporate bonds generally range from 1 to 30 years.

Accepted Answer

A) True 
 B)False

Question 9

In reality, there is no guarantee that convertible bondholders will convert to common stock even if the price of the common stock does increase.

Accepted Answer

A) True 
 B)False

Question 10

The bond debenture is a legal document that details all of the conditions relating to a bond issue.

Accepted Answer

A) True 
 B)False

Question 11

Generally, Canadian government securities issued by the Treasury Department

Accepted Answer

A)  are not graded because they are risk-free.
B)  receive the DBRS' AAA rating.
C)  receive the Standard & Poor's AA rating.
D)  receive the Treasury Department's "risk-free" rating.
E)  are given the same rating by all the bond rating companies.F) B) and D)
G) A) and D)

Question 12

If overall interest rates in the economy fall, then a corporate bond with a fixed interest rate will decrease in value.

Accepted Answer

A) True 
 B)False

Question 13

Investors purchase corporate bonds for

Accepted Answer

A)  interest income.
B)  possible increase in value.
C)  repayment at maturity.
D)  interest income, possible increase in value, and repayment at maturity.
E)  secured promise to pay interest made by the issuing company.F) None of the above
G) A) and E)

Question 14

Treasury bills are issued in minimum units of $10,000 with maturities that range from 10 to 30 years.

Accepted Answer

A) True 
 B)False

Question 15

Treasury bills are:

Accepted Answer

A)  discounted securities sold by the government of Canada
B)  discounted securities sold by corporations
C)  regular interest bonds
D)  compound interest bonds
E)  simple-interest bondsF) C) and D)
G) None of the above

Question 16

A corporate bond that is secured by various assets of the issuing firm is called a(n)  ____________ bond.

Accepted Answer

A)  debenture
B)  indenture
C)  mortgage
D)  preemptive
E)  treasuryF) B) and D)
G) A) and B)

Question 17

Which of the following statements is true?

Accepted Answer

A)  All local newspapers contain information on bond prices.
B)  In bond quotations, prices are given as a percentage of the bond's face value.
C)  The face value for most corporate bonds is $5,000.
D)  To find the market price of a corporate bond, you must contact the corporation that originally issued the bond.
E)  To find the market price of a corporate bond, you must call a stockbroker.F) B) and D)
G) B) and C)

Question 18

A bond issued with detachable coupons that the bondholder must present to a paying agent or the issuer in order to receive interest payments is called a __________ bond.

Accepted Answer

A)  registered coupon
B)  certified
C)  revenue
D)  zero-coupon
E)  general obligationF) C) and D)
G) A) and B)

Question 19

Which ranks bonds from lowest to highest risk?

Accepted Answer

A)  Federal marketable bonds, corporate bonds, provincial bonds
B)  Canada savings bonds, municipal bonds, provincial bonds
C)  Canada savings bonds, provincial bonds, federal marketable bonds
D)  Provincial bonds, municipal bonds, corporate bonds
E)  Provincial bonds, Canada saving bonds, corporate bondsF) A) and D)
G) None of the above

Question 20

What type of bond does not pay interest?

Accepted Answer

A)  Zero coupon
B)  Collateral
C)  Convertible
D)  Callable
E)  BearerF) A) and D)
G) A) and C)

Exam 12: Investing in Bonds

Because bonds are considered debt financing that must be repaid at maturity, the corporation's financial stability has little effect on the bond's value between the issue date and the maturity date.

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What type of bond does not pay interest?

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Which ranks bonds from lowest to highest risk?

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Maturity dates for corporate bonds generally range from 1 to 30 years.

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Maturity dates for corporate bonds generally range from 5 to 7 years.

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Treasury bills are issued in minimum units of $10,000 with maturities that range from 10 to 30 years.

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Which of the following statements is true?

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Investors purchase corporate bonds for

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Generally, Canadian government securities issued by the Treasury Department

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Treasury bills are issued at

Correct AnswerverifiedShow Answer

What is the approximate market value for a $1,000 corporate bond that pays 8 percent interest when comparable bonds are paying 9 percent interest?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

A corporate bond that is secured by various assets of the issuing firm is called a(n) ____________ bond.

Correct AnswerverifiedShow Answer

A registered bond is a bond whose ownership is registered in the owner's name by the issuing company.

Correct AnswerverifiedShow Answer

The bond debenture is a legal document that details all of the conditions relating to a bond issue.

Correct AnswerverifiedShow Answer

The interest rate for a $1,000 bond is 6 percent.If comparable bonds are paying 8 percent, what is the approximate market value for the 6 percent bond?

Correct AnswerverifiedShow Answer

If overall interest rates in the economy fall, then a corporate bond with a fixed interest rate will decrease in value.

Correct AnswerverifiedShow Answer

A bond issued with detachable coupons that the bondholder must present to a paying agent or the issuer in order to receive interest payments is called a __________ bond.

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Treasury bills are:

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In reality, there is no guarantee that convertible bondholders will convert to common stock even if the price of the common stock does increase.

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